Oh, gotcha! Yes, it’s a way of importing the armature so that all of the geometry and rig data is based on the original file but the transforms of the rig are overridden by the proxy object.
A proxy is essentially a duplicate rig that the original rig copies the transforms from under the hood.
The system is a bit of a hack, which is why it may be confusing, and why it’s being replaced with the overrides system which actually allows you to work on the rig itself and not an overlaid duplicate. However, since overrides are still new and not all of the necessary features are present, proxies are still the most stable way of transforming a linked file.